alacer and fml?? australian newspaper, page-29

Fair enough bazza, but there are a couple of points on which I would take issue.

Firstly, I don't understand why you asssume that FML will buy another struggling operation. I certainly hope that they will buy something that is either immediately profitable, or which will be profitable within a matter of months, not years, either as a stand alone operation or in conjunction with utilising some of their current plant and equipment.

There are many assets potentially available for reasons other than that they are not immediatley or potentially profitable in the short term.

Even some companies turning a profit have simply overstretched themselves in anticipation of a continuing high POG, and now have to divest some or all of their best assets to survive.

Others have excellent projects at varying levels of development but don't have the cash to go forward, and so are faced with halting development or selling.

And there are companies operating in a number of jurisdictions who wish to divest profitable assets in one country to concentrate their focus on assets elsewhere in the world (e.g. Barrick and Alacer).

Much will depend on FML's due diligence and negotiating skills, and I have high hopes in that regard under the stewardship of Shandong. My personal experience in business dealings with the Chinese has been limited, but I have been highly impressed by their attention to detail and their ability to seek out less obvious potential bargains, and to negotiate hard on what they see as a good long term investment.

And that latter aspect is of much greater importance to the Chinese than it might be to some others from a different culture. The Chinese are prepared to take a long-term view, and to look ten or more years ahead, and to adopt a broader view as to how an acquisition will fit in with their existing assets or future plans.

It is frustrating for us shareholders that we are not privy to what is going on behind the scenes, but the Chinese are well known for playing their cards close to their chest, and not giving away any information which might weaken their hand or impinge on their ability to successfully close a hard-won bargain.

I know that some people have questioned Shandong's wisdom in buying FML at the price which they paid, but personally I have no doubt that it was a well-planned strategy.

The second point on which I would take issue with you is your suggestion that I base my predictions of the future gold price purely on a gut feeling. Sure, a gut feeling comes into it, but I read and digest as much information as I can about what is happening in the gold market world-wide, and learn as much as I can about the opinions and the sentiment of a wide range of quite knowledgeable people to reach my own opinion of where the gold price is likely to go.

I can be just as wrong as anyone else on that score, but I certainly don't just take a wild guess. I base my 'guesses' on as much information as I can gather.

As you are probably aware, I got it wrong last year when I predicted about April that the gold price would go to $2,000 by the end of 2012. As we now know, it nearly got there, but then dropped away again for a variety of reasons.

I still think that $2,000 US is a definite possibility, but perhaps not till some time in 2014; however, I'm reasonably confident of a downward trend in the Aussie dollar, which will have a profound beneficial effect on profitability for Australian gold producers. An exchange rate of sub-90 cents is a reasonable possibility this year, and 85 cents might become a reality in 2014.

I recently added to my FML holding because I feel reasonably confident that by this time next year it will be a vastly improved company, producing significant quantities of gold at a profit, and with the potential to become one of Australia's biggest gold producers.

But as always, time alone will tell.

Cheers,
Mike